Are these targets realistic? Chatzky later commented that, in an era when many can’t save at all, the point of these benchmarks is to have a target to strive towards.

I’ve written before how age-based savings goals are dumb, but we look anyway. We all start out at different stages and, depending when we reach certain milestones in life, we hit our financial stride at different times.

Sure, there’s justifiable cause for concern if you’re 10 years away from retirement and haven’t saved a dime. But Millennials shouldn’t get too hung-up on some arbitrary savings benchmarks in their twenties or early thirties. Remember, it’s not how you start, it’s how you finish.

Of course, for fun, I had to take a look at my own situation. As I approach 40, the ‘rule of thumb’ says I should have three times salary saved up for retirement. Incredibly, according to my projections, I’ll have EXACTLY three times my current salary saved for retirement by the end of the year when I turn 40. How about that, Chatzky?

6 Comments

At first I thought it was net worth but it’s referring to retirement savings set aside. I think I am in middle and am meeting her target haha- you are right it’s hard to not see where you stand with age metrics like these blanket statements.

I didn’t know that Bogle released another book- I read the original version of the “little book of common sense investing” and thought it was great.

Great list- will definitely check out Andrew Hallems post on retiring with less than you think.

Based on the 2016 Fed Survey of Consumer Finances chart book the median value of retirement accounts by age (for those with retirement accounts) is about 12K for 30, 37K for 40, 83K for 50, and 120K for 60. The median pre-tax incomes for these ages are 41K, 66K, 70K, and 61K. So the median multiples would be 0.3X, 0.6X, 1.2X and 2.0X. These are about 20-30% of the Chatzky targets across the board.

Obviously these targets aren’t realistic, but I think the question is whether they are ‘meaningful’. A nest egg of 10x income at retirement safely supports an annual withdrawal of about 40% of income, which combined with social security, would be enough to support a median level of spending of about 70% of income. For those with pensions these targets can be reduced.

Since pensions are rare these days the difference between reality and the Chatzky numbers neatly encapsulates the retirement crisis. Remember it’s a crisis only to the extent that workers expect to maintain their living standards in retirement– reality dictates most will have to accept a ~30% drop in their spending, they will adjust and life will go on.

With respect to ‘measuring up’ at the low end of the age range, I would say that ignoring these targets is a mistake. Suggesting that these don’t matter sends the message that it’s fine to wait till later to begin saving for retirement. This attitude has two consequences that combine to make the uphill climb impossibly steep when deferred by a couple of decades– namely early lifestyle creep and missing out on the lions share of the power of compounding (8th wonder).

@freebird – Great comment! When I say ignore the benchmarks, I don’t mean putting your head in the sand and avoid thinking about saving for retirement. More like, put your head down and save what you can afford. If you read Morgan Housel’s article on compounding, the vast majority of your gains happen later – and they happen quite quickly and significantly if you’ve built a strong foundation to begin with.

I just don’t want young savers to get discouraged by these numbers and think they’re doing something wrong if they don’t have $100k saved up by age 30, or $250k saved by age 40. Focus on your own goals, continue moving the needle forward every year and you’ll end up okay.

I am unsure of the term “this day and age” as it relates to the people who are considering retirement in say 30 years. This day and age is just that. 30 years ago it was this day and age and 30 from now we will be saying the same thing. There is more opportunity to manage your finances now than ever before. So this day and age is the best time. Setting goals at 20 to achieve 1x annual earnings in ten years is easy. At 25 it’s harder but not impossible. At 29 it’s impossible. So it’s all relative to where you start, age wise, and where this day was when you started. But not starting holds the one guarantee that you achieve your goal of nothing, whatever day and age you don’t start. Jesus Saves, Moses Invests the rest of us have ETF’s.